Dame Stella Rimington, the former head of MI5, has warned that the fear of terrorism is being exploited by the Government to erode civil liberties and risks creating a police state.

Dame Stella became the first woman director general of MI5 in 1992 .Dame Stella accused ministers of interfering with people’s privacy and playing straight into the hands of terrorists. “Since I have retired I feel more at liberty to be against certain decisions of the Government, especially the attempt to pass laws which interfere with people’s privacy,” Dame Stella said in an interview with a Spanish newspaper.

“It would be better that the Government recognised that there are risks, rather than frightening people in order to be able to pass laws which restrict civil liberties, precisely one of the objects of terrorism: that we live in fear and under a police state,” she said. Dame Stella, 73, added: “The US has gone too far with Guantánamo and the tortures. MI5 does not do that. Furthermore it has achieved the opposite effect: there are more and more suicide terrorists finding a greater justification.” She said the British secret services were “no angels” but insisted they did not kill people.

Dame Stella became the first woman director general of MI5 in 1992 and was head of the security agency until 1996. Since stepping down she has been a fierce critic of some of the Government’s counter-terrorism and security measures, especially those affecting civil liberties. In 2005, she said the Government’s plans for ID cards were “absolutely useless” and would not make the public any safer. Last year she criticised attempts to extend the period of detention without charge for terrorism suspects to 42 days as excessive, shortly before the plan was rejected by Parliament.

Her latest remarks were made as the Home Office prepares to publish plans for a significant expansion of state surveillance, with powers for the police and security services to monitor every email, as well as telephone and internet activity. Despite considerable opposition to the plan, the document will say that the fast changing pace of communication technology means the security services will not be able to properly protect the public without the new powers.

Local councils have been criticised for using anti-terrorism laws to snoop on residents suspected of littering and dog fouling offences.

David Davis, the Tory MP and former shadow home secretary, said: “Like so many of those who have had involvement in the battle against terrorism, Stella Rimington cares deeply about our historic rights and rightly raises the alarm about a Government whose first interest appears to be to use the threat of terrorism to frighten people and undermine those rights rather than defend them.”

In a further blow to ministers, an international study by lawyers and judges accused countries such as Britain and America of “actively undermining” the law through the measures they have introduced to counter terrorism.

The report, by the International Commission of Jurists, said: “The failure of states to comply with their legal duties is creating a dangerous situation wherein terrorism, and the fear of terrorism, are undermining basic principles of international human rights law.”